How to Buy a Property in a Poor a State of Repair

House flipping for profit is all about picking up properties in questionable condition and turning them around. Unfortunately, most mainstream lenders are unwilling to issue mortgages against these types of properties.

With residential properties in particular, a long list of requirements must be met for a lender to consider it mortgageable. Examples of which include safe and effective electrical wiring, a functioning heating system, robust safety and waterproofing, a working indoor kitchen and/or bathroom – all mandatory requirements to qualify for a mortgage.

This poses a problem for established and aspiring investors looking to flip homes for profit. There is huge potential in the UK’s 200,000+ long-term unoccupied homes, but how to leverage what is available with such a lack of flexibility on the High Street?

Specialist Lending for Properties in Need of Work

This is where the UK’s specialist lending sector comes into play – an extensive network of dynamic lenders, many of which do not have a presence on the UK High Street. 

Where conventional mortgages for non-standard property purchases are not an option, the following flexible solutions are available:

Bridging Loans – A bridging loan is a short-term secured loan, which can be arranged in just a few working days and is repaid within a term of 1 to 18 months. Unlike a mortgage, bridging finance can be secured against any type of property in any state of repair, and the funds can be used for any legal purpose whatsoever.

Typically charged at around 0.5% per month, bridging finance can be hugely cost-effective when repaid promptly. To workout how much your loan repayment would cost it is strongly advised to use a bridging loan calculator.

Development Finance – Specialist development finance can be even more affordable than a bridging loan, but is usually available exclusively to experienced developers with an established track record. Development finance is aimed at borrowers planning more extensive and ambitious projects, issued in sums of £500,000 to more than £50 million. 

Like bridging finance, development finance can be secured against properties and land in any state of repair.

Commercial Loans – There is also a broad and diverse category of specialist secured commercial loans available for projects like these. All loans issued by the UK’s specialist lending community are bespoke products, tailored to suit the exact requirements of the borrower.

Broker support is essential when considering a specialist secured loan application, as many of the UK’s highest-rated lenders offer their services exclusively via broker introductions.

All About the Exit

Irrespective of the type of loan you decide to apply for, it is essential to focus heavily on your exit strategy. Your lender will expect to see robust evidence of a concrete plan for the repayment of your loan.

For example, you could be planning to sell the after renovating, or you may wish to transition into a longer-term repayment facility and let out to tenants.  Either way, your exit strategy will play a key role in determining your eligibility for this kind of funding, and will also influence the rate of interest payable on your loan.

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